PROVIDENCE – Brown University professor emeritus Peter Howitt has been awarded the Nobel Prize in economic sciences.
Howitt was among three researchers
feted by The Royal Swedish Academy of Sciences who probed the process of business innovation and for explaining how new products and inventions promote economic growth and human welfare, even as they leave older companies in the dust. The prize, announced Monday, honors research that was credited with helping economists better understand how ideas and technology succeed by disrupting established ways.
Howitt shares the honor with Philippe Aghion of the Collège de France and INSEAD in Paris and the London School of Economics and Political Science in the United Kingdom and Joel Mokyr of Northwestern University.
“We are proud and deeply honored that the work of professor Howitt, one of our esteemed faculty, has received the international recognition of a Nobel Prize,” Brown University President Christina H. Paxson said. “At a time when the role of research in sparking innovation in new technologies is so prominent in discussions about our changing society, I’m sure that people around the world will appreciate learning more about professor Howitt’s work, along with the contributions of the other prize winners.”
Howitt said he discovered he had won the Nobel Prize when a Swedish reporter called him as he was waking up. At first, he thought it was a hoax.
“We had no Champagne in the refrigerator. We were not anticipating this,” he joked with reporters.
Aghion said the Nobel committee did not have his co-winners’ contact information, so they asked him for it.
"It’s really the dream prize, with the people I dreamed of getting it with,” Aghion said.
The winners were credited with better explaining and quantifying “creative destruction,” a key concept in economics that refers to the process by which new innovations replace older technologies and businesses.
The concept is usually associated with economist Joseph Schumpeter, who outlined it in his 1942 book “Capitalism, Socialism and Democracy.” Schumpeter called the concept “the essential fact about capitalism.”
Aghion and Howitt studied the mechanisms behind sustained growth, including in a 1992 article that offered a complex mathematical model for creative destruction that added new aspects not included in earlier models.
Examples of creative destruction include e-commerce disrupting retail, streaming services replacing videocassette and DVD rentals and internet advertising undermining newspaper advertising. A classic illustration is horse-cart whip makers put out of business by the automobile.
“In some societies, people who are part of status quo and very successful based on previous technologies gain political power and influence, and are able to arrange things so that it’s very difficult for new technologies to displace them,” Howitt said. “That helps to protect their interests, but also inhibits economic growth [and] stops new technologies from being implemented. This is a conflict between new and old that is a central concept of economic growth. Philippe and I managed to find simple ways to formulate those ideas mathematically.”
“The laureates’ work shows that economic growth cannot be taken for granted. We must uphold the mechanisms that underlie creative destruction, so that we do not fall back into stagnation,” said John Hassler, chair of the committee for the prize in economic sciences.
Howitt and Aghion’s model showed that markets with too few dominant companies can hinder innovation and growth
– a concern that has been raised about industries such as telecommunications, social media platforms and airlines.
The Nobel committee said Mokyr “demonstrated that if innovations are to succeed one another in a self-generating process, we not only need to know that something works, but we also need to have scientific explanations for why.”
Howitt is the third Nobel laureate from the Brown faculty. He joins the late Leon Cooper, who won the Nobel Prize in Physics in 1972 for developing a theory of superconductivity; and J. Michael Kosterlitz, who won the 2016 Nobel Prize in Physics “for theoretical discoveries of topological phase transitions and topological phases of matter.”
Howitt, who was born in Canada, earned a bachelor’s degree in economics at McGill University in 1968, and a master’s in economics the following year at the University of Western Ontario, before moving to the United States to complete his doctorate at Northwestern University. From 1972 to 1996 he taught at the University of Western Ontario, combining his work there with visiting positions at Laval University in Quebec, as well as in France, at Paris and Toulouse universities, and in the U.S. at the Massachusetts Institute of Technology.
In 1996, Howitt moved to Ohio State University, before joining the faculty at Brown University in 2000. He has held editorial positions with many leading economics journals and been granted multiple honorary doctorates.
(Material from The Associated Press was used in this report.)
